The CEO of the Nasdaq-listed software company Microstrategy has debunked the rumor that his company is facing a margin call for a bitcoin-backed loan and will be forced to sell some coins. If the price of the cryptocurrency “falls below $3,562 the company could post some other collateral,” the executive explained.
Microstrategy Hasn’t Received a Margin Call
Microstrategy CEO Michael Saylor debunked the rumor that his company is close to having to liquidate its bitcoin to meet a margin call for a bitcoin-backed loan. The rumor intensified as the price of BTC continued to plummet after the weekend sell-off.
However, Saylor tweeted Tuesday:
When Microstrategy adopted a bitcoin strategy, it anticipated volatility and structured its balance sheet so that it could continue to hodl through adversity.
Microstrategy’s Q1 2022 presentation details that the company took out a three-year term loan of $205 million from Silvergate Bank against 19,466 bitcoins.
Saylor revealed in a May 10 tweet that Microstrategy “needs to maintain $410 million as collateral” for this loan.
The rumor started circulating when Microstrategy’s president, Phong Le, said in May that if the price of bitcoin dropped below about $21K, it would trigger a “margin call.” Typically, a margin call could be met by the company providing more capital or liquidating the loan’s collateral.
The price of bitcoin dipped below the $21K level this week. However, Microstrategy told Reuters Tuesday that it has not received a margin call, emphasizing:
We can always contribute additional bitcoins to maintain the required loan-to-value ratio.
Furthermore, Saylor explained that Microstrategy’s 115,109 bitcoins can cover the $410 million collateral down to the BTC price of $3,562. However, if the price of the crypto were to fall even lower, Microstrategy has other assets it could post as collateral, the executive detailed, elaborating:
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